Definition
A lump sum payment that qualifying employees are entitled to receive when they are made redundant. The amount depends on the employee's age, length of continuous service (up to 20 years), and weekly pay (subject to a cap).
UK Context
Governed by the Employment Rights Act 1996, employees with two or more years of continuous service are entitled to statutory redundancy pay. The weekly pay cap is reviewed annually (719 pounds in 2025/26). The calculation is: half a week's pay for each year of service under 22, one week's pay for each year aged 22-40, and one and a half weeks' pay for each year aged 41 and over.
Best Practices
- Calculate redundancy pay accurately using the current weekly pay cap and check calculations with the government's online calculator
- Consider offering enhanced redundancy pay above the statutory minimum as part of the redundancy package
- Clearly communicate the redundancy pay entitlement to each affected employee in writing during consultation
Frequently Asked Questions
Is statutory redundancy pay taxable?
Statutory redundancy pay up to 30,000 pounds is tax-free. Payments above this threshold are subject to income tax and National Insurance. The tax-free allowance also covers other termination payments such as ex-gratia payments.
Can an employee claim redundancy pay if they find a new job during notice?
Yes, the employee's right to statutory redundancy pay is not affected by finding new employment during the notice period. However, if the employer offers suitable alternative employment which the employee unreasonably refuses, they may lose their entitlement.